Making good on promises to the private sector

22 Mar 2015 - Commentary

Over the last couple of months, Sri Lankans have been presented with two budgets for the year 2015. The one in October 2014 was introduced by the previous regime in order to ‘curry favour’ with the public ahead of the presidential election of January 2015. The other came from the newly appointed government following the election. Both governments made promises to increase workers’ salaries, but there is a discrepancy between the budgetary allocations and promises made to public and private sectors workers.

Initially, the government of Mahinda Rajapaksa introduced a Rs. 3,000 salary increment in October 2014 for the public sector. Later, the present government added Rs. 5,000 to this amount. Consequently, public sector workers will receive an increment of Rs. 8,000 as an “interim allowance,” which is not added to the basic salary. Workers in the private sector, however, have not been as fortunate.

Initially, private sector employees were promised an increment of Rs. 500 by the October 2014 budget and Rs. 2,500 by the budget of the present government, both of which have instead been left subject to the discretion of employers. It is against this background that the private sector workers recently started protesting, demanding the Rs. 2,500 increment, based on the request to employers made by the current government. On February 25th Free Trade Zone workers protested in Katunayake, demanding the Rs. 2,500 pay hike, and on March 12th trade unions representing the rights of private sector workers protested in Colombo demanding the same.

Wage increase

According to the Department of Census and Statistics, the average expenditure for a household in the year 2012/13 in Sri Lanka is Rs.41,444, and Rs.58,930 for the urban sector. This expenditure barely matches the income generation of the private sector where the average per capita income is Rs.11,819 and Rs.17,262 for the urban sector. Moreover, according to calculations based on the Colombo Consumer Price Index (updated February 2015, base value 2006/07) the cost of a basic consumption basket for the average household in Colombo is around Rs. 51,000. Beyond the disparity in household earnings and spending, the macro data indicates the high cost of living in this country.

Currently in Sri Lanka, the minimum wage for those working in the formal sector is regulated by the Wages Boards Ordinance No. 27 of 1941 and its amendment Act No. 36 of 1982. The minimum wage for a garment factory worker (Grade I, five years’ experience), for example, is a paltry Rs.11,330 per month. According to the Wages Boards Ordinance, the minimum wage consists of a basic wage and special allowances. It is supposed to be revised annually depending on the Colombo Cost of Living Index (CCLI) and Cost of Living Allowance (COLA), or at the behest of trade unions. Increases to the minimum wage are based on wage indexation, consumer price indexation and the assumption of a (decent) living standard.

The main issue for the private sector workers is that these procedures have not been implemented in the recent past. Normally in the absence of increments the workers have found relief through the Cost of Living Allowance. The Cost of Living Index has not been gazetted, however, since January 2009. A recent discussion at the National Association for Trade Union Research and Education (NATURE) with the Collective for Economic Democratisation in Sri Lanka (CEDSL) revealed that most factories rely on the last gazette allowance, ignoring the increase in the cost of living. As a result, workers face dire circumstances since they do not have the means to meet the rising cost of living. In addition to wage increases, the trade unions are also advocating for a national minimum wage for both the private and the public sector. In an earlier attempt, when trade unionists had made such a demand, the government instead introduced a Rs. 1000 monthly allowance to the workers whose monthly remuneration is Rs. 20,000 or below, through the Budgetary Relief Allowance Workers Act No. 36 of 2005. This was the last response workers received from the government, despite their persistent demands for a pay hike.

View of the workers

In order to gain a better sense of the implications of the wage hike on the ground, members of the CEDSL spoke to workers in the Katunayake Free Trade Zone. Those interviewed noted that at present the typical basic salary for a Machine Operator is Rs. 12750. The workers say that if the salary increase from the budget is given it will be added to the basic salary, from which the Employee Provident Fund contribution is also calculated. Otherwise all the other payments for them come in the form of allowances.

When the workers demand pay hikes from the management, however, they are often confronted with the excuse that an increase in pay is not possible as their productivity has not increased. According to the workers, however, this is not true. Often production targets are shifted as workers become more efficient in making products. While further cases need to be examined, the debate reflects the gap in perception between workers and employers.

One worker argued, for example, that the garment factory in which he works received awards for the best sample room in South Asia in 2013 and 2014. It has been selected as the first in the country. In this context, he said, the owners cannot say the production is low, even though this has often been used to justify lower wages. He further stated that his factory is placed at the seventh place in the top 10 garment factories in the world, which is a development from its earlier position at 13th place; meaning, production has been maintained at a high level for an extended period of time.

Given the lack of confidence in general toward management, private sector workers are banking on the government to implement a minimum national wage. As a remedial measure, workers demand the immediate implementation of the budgetary promise Rs. 2,500 as they need to live and provide for their families in an economic context characterised by increasing immiseration (economic impoverishment).

Private sector demands

Building on the rhetoric about “good governance” promoted by the current government, private sector workers at present are demanding the blanket implementation of the budgetary promise of Rs. 2,500. They argue that similar to public sector workers, as citizens of this country they are also entitled to decent living. While the government has begun to implement some of its promises for the public sector, the private sector however has been neglected. The wage demand is one step on the long road to achieving parity across the sectors.

The larger struggle, however, will require that the Colombo Cost of Living Index be gazetted in order to obtain an accurate Cost of Living Allowance. Furthermore, unions are requesting a national minimum wage. The wage will recognise the equal contribution of labour across private and public sectors. This must be introduced through a legally binding provision such as a parliamentary act, so that it will be not just a mere promise, but an entitlement for all who have contributed their labour to society.

This piece also appeared in The Sunday TImes on 22 Mar 2015